Daily FX Update, 02 June 2016

v  ISM data shows US manufacturing sector barely better in May v  Fed’s Beige Book sees tightening job market amid modest economic growth v  UK house price annual growth rate slow in May v  Japan’s Abe delay sales-tax hike by two and a half years v  Malaysia’s manufacturing activity continues to deteriorate

OVERNIGHT MARKET UPDATE: ·         US – The ISM Manufacturing came in above market expectations at 51.3. Twelve of 18 industries surveyed reported growth in May. Most of the underlying components were positive. Prices paid spiked to 63.5 and new orders were at 55.7. Factory inventories continue to be drawn on at 45, compared to 45.5 a month ago, while supplier delivery times were at 54.1, from 49.1, highlighting supply chain congestion could be starting. ·         US – The Fed’s Beige Book report indicated that most districts were seeing the same “modest” or “moderate” growth through the end of May. The report also indicated that consumer spending ticked up "in many districts" and that construction and real estate activity had "generally expanded" since April. Despite modest economic growth, “tight labour markets were widely noted,” the report added. ·         UK – The annual rate of house price growth cooled further in May, recording a growth of 4.7%, down from 4.9% in April and 5.7% in March. One of the factors that contributed to the slowdown was that many people had rushed to buy houses in March before the stamp duty charges took effect on 1st April. ·         Currencies – The US dollar dropped against the yen after Japanese Prime Minister Abe surprised markets by announcing that he would delay a planned sales-tax hike by 2.5 years. Fed’s Beige Book which painted a picture of subdued economic growth also contributed to the weakening of US dollar against major currencies.    ·         Equities – Stock markets remained wary amid the soft global data pulse. As oil recovered through the US session, US stocks managed to close flat after a soft session. ·         Rates – The spread between 2- and 10-year Treasury yields narrowed to its tightest level since late 2007 following the better-than-expected ISM data. ·         Energy – Crude Oil had come under pressure as Canadian producers continued to prepare to restart some of the operations halted by the recent wildfires. However, talk of another production freeze at today’s OPEC meeting saw prices recovery. ·         Precious Metals – Gold prices closed lower despite the weaker USD as the ISM data fuelled expectations that Fed will decide to raise interest rates this summer.

INDICATIVE MAJOR CURRENCIES Last Close 8.02 am Snapshot Expected Range for Today Bid Offer Low High USD/MYR 4.1480 4.1380 4.1740 4.1360 4.1810 JPY/MYR 3.7826 3.7800 3.8160 3.7700 3.8400 SGD/MYR 3.0088 3.0010 3.0350 3.0000 3.0500 EUR/MYR 4.6350 4.6320 4.6690 4.6000 4.7000 AUD/MYR 3.0052 2.9950 3.0300 2.9800 3.0500 GBP/MYR 5.9822 5.9730 6.0090 5.9400 6.0600 USD/JPY 109.66 109.22 109.63 108.82 109.82 EUR/USD 1.1174 1.1030 1.1340 1.1130 1.1240 AUD/USD 0.7245 0.7090 0.7400 0.7200 0.7300 Source: Bloomberg, AmBank